Participants Agree: COE and MBA Programs Lend Credibility to Districts' Financial Reports
By Nicole McPhee
This article first appeared in the February 2004 issue of School Business Affairs. Many people are aware of ASBO International's dedication to school business management, but few know how far that level of commitment actually goes. One of ASBO's greatest developments was the creation of its two major award programs: the Certificate of Excellence in Financial Reporting Award (COE), established in 1972, and the Meritorious Budget Award (MBA), established in 1995. Both programs use an established set of criteria and guidelines to encourage the development of user-friendly financial documents and help school business officials build their skill set. The primary objective of the COE program is to recognize excellence in the quality of a school system's comprehensive annual financial report (CAFR). The MBA program focuses on a school's budget presentation.Using the MBA criteria allows budget developers to produce an easy-to-read document that tells the district's financial story, and the comprehensive reviewer feedback becomes a tool for the following year.
Several ASBO members recently shared their thoughts on the value of participating in the COE and MBA programs. They are Melody Douglas, Kenai Peninsula Borough School District in Alaska; Jim Graham, South Lyon Community Schools in Michigan; Bonnie Halsey, Carrollton-Farmers Branch Independent School District in Texas; Debra Jacoby, Union Public Schools in Oklahoma; Dennis Jarrett, York County School Division in Virginia; Ric King, Schaumburg Community Consolidated School District 54 in Illinois; Theresa Maniscalco, Lewisville Independent School District in Texas; and Rebecca McClain, Savannah/Chatham Board of Education in Georgia.
Why does your school participate in the Certificate of Excellence Program?
The most common answers to this question were professional recognition and the credibility COE gives a school's financial staff and CAFR. "The primary reason we began participating in the Certificate of Excellence program wasâ€¦the credibility it gives our CAFR and, by extension, our financial staff," McClain said. "For a number of years our district's financial records were unreliable, untimely, and notorious. Our first Certificate of Excellence Award was a verification that our improvements were real and significant." "Union participates because we want our patrons, parents, and the business community to know that we strive for excellence in both the academic and the financial areas of managing the school district," Jacoby said. "In addition, we believe that it increases our bond rating and, therefore, lowers the interest expenses" incurred by the community. Other reasons cited for participating in the COE program included professional development and the fact that the standard format gives local decision makers all of the information they need and allows them to compare financial data with those of other districts.
How does your school benefit from receiving the Meritorious Budget Award?
Many of those interviewed said the MBA program makes school officials think about aspects of the budget they may have overlooked had they not submitted their budgets for review. Others cited public relations benefits, professional recognition, and a positive impact on their bond ratings as major benefits of participating. Several also mentioned the standard format as a benefit because it allows them to compare their budgets with those of other districts. The MBA program "sets the standard for comparison of budget documents with other school districts," Jarrett said. The school board values the awards program, he continues, because it demonstrates a high standard for financial matters.
How do the reviewers' comments help in your budget and CAFR preparation?
"The reviewers' comments offer a second set of eyes and . . . healthy, constructive criticism," King said. "Also, knowing someone else will be critiquing the document makes you focus more on getting things right the first time and eliminating errors." Constructive criticism was a benefit mentioned by several of those interviewed. "The comments offered by the reviewers provide guidance for improvement of the CAFR and budget document[s]," Maniscalco said. "The goal is to present information that is useful to the end user, and the review comments help to guide that process." According to McClain, "The reviewers' comments help us to meet our goal of continuous improvement" by providing us with another perspective. Graham concurred, adding that "the reviewers' comments are one of the most important aspects of continually improving the documents."
Statistical tables seem to be a real challenge for many participants, particularly gathering information from outside entities. "The most time consuming aspect of preparing the CAFR is the preparation of the statistical section, because information must be obtained from outside entities," Maniscalco said. "Those outside entities," she continued, "may not consider our CAFR preparation a priority." Halsey agreed. "The most complicated aspect of preparing our CAFR is that some aspects of our budget are controlled by other departments, and [acting on] reviewers' comments for future documents is not always possible,"she said. Another area of frustration mentioned repeatedly by those interviewed involves implementing and meeting all the new requirements of GASB Statement 34. "The most complicated [aspect of preparing our CAFR] is that we are required by state law to maintain our records under a statutory accounting system and then must convert those records at year's end to GAAP [generally accepted accounting principles], and then to GASB 34 format," Jacoby said. "This can be time consuming and tiresome. GASB 34 has added a lot of complexity, cost, and time to our CAFR" preparation process." "In our district," McClain said, "the two most complicated aspects of preparing the CAFR are preparing the notes to the financial statements and meeting all the new requirements of GASB 34." Budget preparation, Graham said, is entirely different from CAFR preparation. "I like to consider the CAFR as science, and the MBA as art," he said. "The CAFR can be updated fairly easily each year, while the MBA requires more. With the MBA, the most difficult aspect is probably with formatting the entire document for printing purposes" and writing the executive summary.
Basically, Douglas said, the programs help districts provide easy-to-read, understandable documents that are challenged less often by the media and the public. "The public trusts us more" because we've received the award and because we participate on a voluntary basis, King agreed. Every one of the eight school business officials interviewed said their schools take pride in receiving the awards and that district staff and members of the community recognize a certain level of competence in the financial staff. "Public opinion -- here, at least -- seems to be that all school district employees are lazy and stupid and have high salaries," McClain said. "Participating in the COE program allows us to demonstrate that our work meets stringent national standards. It also allows us a specific opportunity each year to highlight our achievements." "Receiving the awards," Maniscalco said, "indicates that the district has met or exceeded the standards of the program. This is particularly important in meeting with bond rating agencies."
Nicole McPhee was ASBO International's Coordinator for the Certificate of Excellence in Financial Reporting Program from 2003 to 2005.